Canada’s benchmark stock index declined on Tuesday, retreating from its recent record high as investors returned from a holiday weekend and adopted a cautious stance ahead of upcoming economic data that could shape the Bank of Canada’s monetary policy decision later this month. The country’s economy contracted more than expected during the second quarter, primarily due to a sharp drop in exports. In response, financial markets adjusted their expectations, raising the probability of a rate cut at the September 17 meeting to 50.5%, up from 48% previously. The central bank has maintained its benchmark rate at 2.75% across its last three meetings since March. Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth, suggested that a reduction of 25 to 50 basis points could be feasible in the near term to stimulate economic activity, citing weakening business performance, declining exports, and a recent negative employment report. Market participants are now awaiting the release of new labor market figures this Friday; a contraction in employment could solidify expectations for an imminent rate reduction. In addition, investors are monitoring the U.S. nonfarm payrolls report, also due Friday, which will offer insights into the health of the American labor market and influence Federal Reserve policy considerations. Meanwhile, the yield on Canadian 10-year government bonds increased by 6.4 basis points to 3.439%, while the U.S. equivalent rose to 4.265%, contributing to equity market pressure amid concerns over fiscal sustainability.
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Sept 2 (Reuters) – Canada ‘s main stock index on Tuesday retreated from the previous session ‘s record high, as investors returning from a long weekend turned cautious ahead of key economic data that could influence Bank of Canada ‘s interest-rate path later this month. n nSign up here. n nCanada ‘s economy contracted more than anticipated in the second quarter, as exports significantly declined. n nMoney markets on Tuesday increased their rate-cut bets for the September 17 meeting to 50.5% from a previous 48%, following the GDP report. 0#CADIRPR n nThe BoC has kept rates steady at 2.75% at its last three meetings since March. n nThe BoC “can easily cut 25-50 basis points in the upcoming meetings to stimulate this economy, which is basically right now non-existent,” said Allan Small, senior investment advisor at Allan Small Financial Group with iA Private Wealth. n nHe attributed the outlook to declining business activity, weaker exports and a negative jobs report released earlier. n n”This Friday, we ‘ll get a new jobs number and we ‘ll see what it says. If it shows jobs contraction or decline, then it ‘s pretty much 100% done deal that they will cut rates in September.” n nInvestors will closely watch Canada ‘s unemployment data due later this week. n nFocus will also be on the U.S. nonfarm payrolls report expected on Friday, which will provide investors and the Federal Reserve a clearer picture of the labour market that has become the centre of policy debate. n nA divided U.S. appeals court on Friday ruled that most of President Donald Trump ‘s tariffs are illegal. n nCanadian government 10-year bond yields rose 6.4 basis points to 3.439%. The yield on similar U.S. government benchmark debt rose to 4.265%, pressuring equities on fiscal worries. n nReporting by Sanchayaita Roy in Bengaluru; Editing by Shreya Biswas